In 2004 Belgium introduced a specific system of tax ‘amnesty’ whereby Belgian residents could “regularize” taxes on income from capital that they had deposited in banks outside Belgium and that they had ‘forgotten’ to declare for tax purposes in Belgium. The measure was initially very successful and, in 2004, resulted in the recovery of an additional 492 million Euros in taxes. A revised version of the system has been in force since 2006 and has proven equally, if not more, successful.
Under the existing system, the undeclared capital remains untaxed provided the interest and dividend income for the last 7 years is proven and declared. The declared income is then subject to tax at normal rates plus 10%. Once this tax has been paid the capital may be repatriated or left abroad without any other Belgian tax on the capital or past income from the capital.
In the autumn of 2012 the Belgian government announced that the current system would be replaced by a new set of regulations. However, to date, the proposed new law has yet to be presented to Parliament and rumours abound as to the contents of the draft of the new law.
According to the latest press reports, the new system would apply as of 1 July 2013 and would cease to apply on 31 December 2013. The new system would apply to so-called serious fraud as well as ‘ordinary fraud’, the difference being that for ‘ordinary fraud’ the tax surcharge would be 15% (as opposed to 10% currently) and that for ‘serious fraud’ the surcharge would be 20%.
One of the key questions that remains open concerns the immunity from criminal prosecution. Under the present draft there would be immunity for ‘ordinary’ fraud but for serious and organized fraud the immunity would cover only prosecution for tax and not for other offences, such as money-laundering.
Last but not least, as currently drafted, the new law would apply to life insurance contracts entered into with insurance companies outside Belgium where the contract has been used to avoid taxes in Belgium.
Maurice Eloy Charles Price
